Vilo v John Fairfax & Sons Ltd & Anor

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Defamation

17027/83 Enn VILO v JOHN FAIRFAX & SONS LTD AND ANOR Judgment

HER HONOUR : 1 In the final round of this litigation the plaintiff, who successfully sued the defendants for damages for defamation, seeks an order for interest on the jury's award of damages, and an order that the costs to which he is admittedly entitled include the costs of two counsel. Ancillary questions that arise, should an award of interest be made, concern the rate at, and the period over, which the order should extend.

History 2 On 14 December 1983 the plaintiff instituted proceedings against the defendants for damages for defamation arising out of two publications, one in the Business Review Weekly, published 13 - 19 August 1983, and one in the Sun Herald, published 14 August 1983. Progress of the claim was, to put it kindly, leisurely, and for much of the period between 1983 and 1999 the matter could fairly be described as dormant. By notice of motion filed on 28 April 1995 the defendants sought to have the proceedings dismissed for want of prosecution. On 17 November 1995 Sperling J dismissed that application. 3 Ultimately a trial before a jury began on 1 November 1999 and proceeded until 24 November when the jury returned verdicts in favour of the plaintiff in respect of four of the six imputations pleaded, and in favour of the first defendant in respect of the remaining two imputations. The jury awarded the plaintiff a total of $520,000 damages. On 6 October 2000 I rejected a defence of qualified privilege pleaded to the four imputations on which the plaintiff succeeded. All that remains to complete the matter in this Division is the determination of the present two applications. The plaintiff has agreed to an order that proceedings on the judgment be stayed pending an appeal to the Court of Appeal.

Application for leave to amend 4 At the commencement of the argument in relation to the claim for interest, it was pointed out that at no time or place in the original statement of claim, or in any of the various amending documents, had a specific claim for interest been made. By SCR Part 7 rule 1 (5) a claim for interest must be specifically made. Counsel for the plaintiff accordingly applied for leave to amend the statement of claim by adding such a prayer. The application was opposed by counsel for the defendants. He relied upon affidavit evidence of the solicitor for the defendants, which, essentially, set out the long and tortuous path the litigation has taken. This material is relevant to a substantive claim for interest, but is less relevant to the application for leave to amend by adding the claim. Although given the opportunity to do so, the defendants did not adduce any evidence of actual prejudice that would accrue if the very belated claim were to be entertained; they did not point to any single decision made or option taken during the course of the proceedings that would have been made or taken differently had they been on notice that a claim for interest would be made. The defendants relied instead upon presumptive prejudice. 5 Claims for interest are now routine where plaintiffs claiming damages are successful, and the contrary was not argued. I would be prepared to infer that the omission to claim interest was not noticed, by any of the legal practitioners representing any of the parties, until the claim came to be argued at the very last moment. 6 Counsel for the defendants conjectured that the explanation for the failure to claim interest might lie in the date of commencement of the proceedings, 1983. At that time, so it was said, the prevailing wisdom was that interest could not be recovered on an award of damages for defamation, and that that remained the position until 1987 when, on 31 March, the Court of Appeal handed down its decision in John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131. In that case the Court of Appeal held that the power to award interest on damages up to the date of judgment extended to cases in which the cause of action was defamation. Even after that date, and despite the further amendment of the statement of claim, no express claim was made. From this, counsel for the defendants argued, it should be inferred that the omission to claim interest was a deliberate and informed one, which the plaintiff should not now be permitted to reverse. Counsel relied upon two specific matters: firstly, that the plaintiff was represented, until very shortly before the trial (but not at the trial) by counsel who had successfully argued in Kelly in the Court of Appeal for an award of interest in defamation cases: accordingly, the plaintiff (or at least his legal advisers) could not be taken to have been ignorant of the entitlement to make a claim; secondly, that the application to strike out for want of prosecution had caused the plaintiff in some respects to compromise his rights, or to yield entitlements he might otherwise have asserted, and it should be inferred that the right to claim interest was included in what he surrendered in order to maintain the right to prosecute his claim. As to the latter, there is nothing in the judgment of Sperling J to support the conclusion that the plaintiff deliberately and knowingly gave up the smaller right in order to maintain the larger. The proper inference is that, when the proceedings were before Sperling J, as indeed throughout their history, nobody's attention was turned to the absence of a claim for interest. As to the former argument, I would again not infer that the omission was deliberate. Certainly, until the application came before Sperling J, there was no reason evident why the plaintiff would give up his right to make a claim. No question of compromise arose (so far as the evidence before me goes) before 1995 when the strike out application was made. 7 I am satisfied that the omission to claim interest (at least from 1987) was an oversight on the part of the plaintiff's legal advisers. I am satisfied that the defendants did not alter their position, or their approach, one iota in reliance on the omission. Accordingly, at the commencement of this hearing, I granted leave to the plaintiff to make the amendment by claiming interest.

The merits of the interest application 8 The source of the power to order interest on damages between the date the cause of action arose and date of judgment is s 94 of the Supreme Court Act 1970. Prima facie, a successful plaintiff will be entitled to an award of interest: Ruby v Marsh (1975) 132 CLR 642; and see the cases cited in Ritchie, Supreme Court Procedure NSW, and the notes to s 94. 9 The defendant did not argue to the contrary, and indeed, once leave to amend was granted to the plaintiff, did not argue that some award of interest was not appropriate. They confined themselves to arguing (i) that, having regard to the extraordinary delay in bringing the proceedings to a conclusion, interest ought to be allowed only over a short portion of the seventeen years since their commencement; and (ii) that any interest awarded ought to be calculated at a rate of 2 percent.

Delay 10 The basis for the first proposition was the delay in bringing the proceedings to finality. The defendants argued that the inordinate period of time between the date of publication (or the date of commencement of proceedings, which was not significantly later) and verdict is a factor properly to be taken into account, in their favour, and should result in an award of interest calculated over a shorter period. This requires an examination of the authorities relating to the relevance of delay in finalising a claim. But it also requires some consideration of the reasons for the delay and identification of the level of blameworthiness (if that is the correct word) for the delay. 11 No clear statement of the relevance or the effect of delay emerges from the authorities to which I was referred. The defendants relied upon passages from the decisions of Simonius Vischer & Company v Holt & Thompson [1979] 2 NSWLR 322; Anderson's (Pacific Trading Co Pty Ltd) v Karlander New Guinea Line Ltd [1980] 2 NSWLR 870; Bennett v Jones [1977] 2 NSWLR 355; John Fairfax & Sons v Kelly (1987) 8 NSWLR 131; Australian Consolidated Press v Driscoll (1988) Aust Torts R 80 -175. 12 In Simonius Vischer Moffitt P wrote: "It has been long generally accepted that, whatever be the cause, delay between cause of action and judgment is productive of unfairness to one or other or both parties. While accepting that the defendant has the advantage of not having to pay the money and has the use of it, it does seem to me that, to make an order for the payment of interest at commercial rates extending for long periods into the past is prima facie productive of unfairness to the defendant; and that it is the more so if he has had no notice, or no early notice, of such a claim. For a defendant or his insurer or both to order their affairs over a long period of years in ignorance that the claim against them is subject to a claim for interest at commercial rates during all of that period, is likely to be productive of unfairness and detriment, but possibly of a kind difficult precisely to pinpoint or demonstrate. In some instances, for example, complications may arise by virtue of the incidence of taxation in relation to benefits derived from the money notionally not paid in particular years compared with the liability to pay the full commercial rate of interest. Of course, the plaintiff himself may be worse off by the delay in not receiving the money to which he is entitled, but if the delay is his, this factor may have less weight. At least, it is reasonable to conclude the plaintiffs had it in their power to bring their claim to a conclusion some years earlier than they did. It has been argued, however, on behalf of the plaintiffs that, if some detriment has accrued to the defendants, then this could have been proved by evidence. However, particularly when notice of the claim is given years later, the type of detriment often will be difficult to demonstrate, except by some exhaustive review of the financial structure and operations of the defendant and/or his insurer. This would be a matter of some difficulty in the present case, having regard to the international character of the parties and the changes in exchange rates which occurred during relevant periods. It would be unfortunate that awards of interest should depend upon such inquiries, or that where, for example, proceedings are grossly delayed by reason of the rate at which the plaintiff elects to proceed, the defendant should face an order of interest throughout the period, unless he is able by evidence to pinpoint and prove some particular detriment. … It is also relevant that the plaintiffs did not regard themselves originally to be entitled to resort to s 94, and that the defendants let the proceedings take their prolonged course in ignorance that a claim would later be made. The defendants, at least until September 1977, were entitled to assume they were immune from any claim for interest under s 94." (pp338 - 339) 13 I have already found, and adhere to the view, that the defendants in this case did not alter their position in reliance upon the absence of a claim for interest. I am satisfied that the financial affairs of the defendants (or their insurers if there are any) have not been affected by the defendants' knowledge that no claim for interest was made. Nevertheless, the passage is of relevance and determines that delay may be taken into account. 14 Simonius Vischer was applied by Hunt J in Anderson's (Pacific Trading). 15 Both of these cases may be distinguished from the present in two respects. Firstly, they involved claims for economic loss as distinct from the claim for non economic loss inherent in a defamation action. Secondly, they were decided before the High Court delivered its decision in MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657. It may be argued that a distinction should be drawn between the relevance of delay in relation to awards of damages for economic loss and awards of damages for non-economic loss. That, however, it seems to me, would run counter to the reasoning of the High Court in Gogic. The distinction between the two kinds of loss is relevant to the rate at which interest is awarded, but, in either case, it is to be taken that the plaintiff was entitled to the award of damages from the date the cause of action arose, and has been deprived of the money (of which the defendant has had the corresponding benefit) since. That the passage of time and the subsequent award of damages for non economic loss calculated by reference to later values to some extent satisfies the purpose of, or even substitutes for, an award of interest, is taken into account in the determination of the rate at which interest is ordered to be paid. 16 Bennett v Jones was a case involving a claim for damages for personal injury. Moffitt P (with whom Hutley and Samuels JJA agreed, both with additional remarks) wrote: "In times of inflation, particularly high inflation … special problems arise where there are substantial delays. If there is a delay, then a plaintiff, in a sense, is better off. The award is fixed by reference to the value of the money at the date of trial. If the trial could be held immediately after the accident, all loss would be in the future, and future inflation would have to be disregarded. To the extent the trial is delayed, past inflation is allowed for. In this sense the plaintiff is better off, to the extent that the trial is delayed. The comment, however, is open that the inability to allow for future inflation, when a party cannot hedge effectively against it, is unfair to a plaintiff and that a later trial, when intervening inflation has manifested itself, proves that the earlier trial would have given inadequate compensation, and that the later trial simply is less unfair. It may be more accurate to say that, while delay only does that which is fair to a plaintiff, it may be unfair to a defendant, because he also cannot effectively hedge against inflation, or, if an insurer, because he cannot effectively provide for future inflation. In any event, as an award of interest will relate only to past losses, inflation to the date of trial normally will only have minor consequences." (pp 370 - 371) 17 In Driscoll Hope JA, with whom Priestley JA agreed, said: "The basis for taking delays into account if they are occasioned by the fault of the plaintiff seems to depend upon prejudice to the defendant by reason of the delay. In this case the defendant has had its money during the whole of the period of delay and there is no evidence of the actual prejudice to it by reason of that delay. However it was put by Moffitt P (with whom in this regard Reynolds and Samuels JJ.A. agreed) in Simonius Vischer & Co … that a defendant may suffer prejudice of a kind difficult precisely to pinpoint or demonstrate, and an inability (at any rate without a long investigation and inquiry) to prove prejudice should not necessarily preclude the defendant from being able to rely upon the delay in diminution of the period in respect of which interest is to be calculated. Whatever application this view may otherwise have, it would seem to have no relevance in a case where a defendant knows that there is a claim for interest and is entitled but fails to take steps to put an end to the delay. Thus if in the present case the plaintiff had claimed interest initially, there seems to be no reason why the defendant should not have been able to take steps to put an end to the delay between 1981 and 1984 by taking steps itself to have the matter set down for hearing. If it did not do so in those circumstances it seems very arguable that the delay should not be taken into account. However in the present case the defendant had no notice of any claim for interest until 20 August 1984, after the expiration of the delay under consideration. How then, if at all, should this delay be taken into account? As I have indicated no actual prejudice has been established in the present case. None of the particular types of prejudice referred to by Moffit P in Simonius Vischer has been pointed to as a possible source of prejudice to the defendant, and some at least of the circumstances taken into account in that case are not present in this case. Simonius Vischer cannot be taken as an authority for a presumption of prejudice to defendants where there is a delay, and I do not think that it establishes any principle which should be applied in the present case. If there were nothing more I would doubt that the delay should be taken into account at all. The plaintiff is not, as it were, to be fined for his fault by receiving less interest. However the period between the subject publication and trial, including the period of the delay, was undoubtedly a period of continuous inflation. If the matter of calculation of interest were to be carried out strictly on the basis of a hypothetical award to the plaintiff on the date of publication, the capital sum upon which interest would be calculated would very probably be much less than the sum of $100,000 awarded by the jury in the present case. That amount was given by the jury by reference to 1985 money values. The plaintiff should not, as it seems to me, be awarded interest in respect of a period of delay due to his fault which led to the amount of the award being made in an inflated money value to the extent that that inflation resulted from the period of delay. In other words, the verdict which the plaintiff obtained includes an added inflation factor of two and a half years change in money values. In my opinion, this consideration, in the circumstances, justifies the taking into account of the period of the delay in reducing the award of interest to the plaintiff. Although the total period of delay was three years, I do not think that the whole of this time should be taken out of the interest period. Delays of many kinds occur in proceedings such as this almost as of course. The period of delay should be taken as two and a half years." (pp 67,650 - 67,651). 18 This decision, too, pre-dates Gogic. Although the attention of the High Court in Gogic was not focussed upon issues of delay, what was said in that case bears upon the earlier statements I have cited. In Gogic the High Court, in a joint judgment, observed that the purpose of an award of interest is to compensate a plaintiff for the loss or detriment suffered by being deprived of the verdict money during the relevant period; their Honours went on to say: "Damages for pre-trial non-economic loss, however, are assessed in accordance with the value of money as at the time of the award. In no way is any loss which a plaintiff incurs by reason of being deprived on his or her damages for pre-trial non-economic loss brought about by inflationary factors. In those circumstances, to award interest on damages for non-economic loss during the pre-trial period by reference to commercial rates is to compensate the plaintiff for a 'loss' which he or she has not sustained." (pp 663 - 4)" 19 Later, their Honours said: "A plaintiff is awarded interest because he or she has been deprived of the use of his or her money, not because he or she has foregone investment opportunities. It would be wrong, for example, to refuse to award a plaintiff interest simply because the real rate of interest during the relevant period was a zero or a negative figure. Moreover, to award interest calculated by reference to the real rate of interest, when it has been a positive figure, ignores the important fact that the return to the real-life investor from his or her investment is diminished by income tax on both the inflationary and real profit components of that return." (p 666) 20 The passage from Driscoll, in which Hope JA stated the view that a plaintiff should not be awarded interest in respect of a period delay due to his (or her) fault which leads to the amount of the award being made in an inflated money value must be read in the light of the decision in Gogic. Those views, it seems to me, were taken into account by the High Court in the reduction of the rate of interest applicable to awards of damages in respect of non economic loss. 21 That brings me to the second relevant factor. The defendants' submission assumes that the whole of the delay in the finalisation of the proceedings was attributable to the fault of the plaintiff. But the chronology annexed to Mr Bates' affidavit shows that there was considerable inaction on the part of the defendant. That this was so is confirmed by the findings of Sperling J in his decision on the application to strike out the statement of claim. Sperling J considered that the defendants' decision not to make such an application until 1995 contra indicated any conclusion that they had been unduly prejudiced by delay on the plaintiff's part. 22 It is well recognised that a defendant faced with an inactive plaintiff has a tactical decision to make: to permit the sleeping dog to lie in the hope that it might never bestir itself; or to move to silence the sleeping dog permanently. A defendant who opts for the former course is taken to have, to some extent at least, acquiesced in the plaintiff's inactivity. That defendant will find it more difficult to succeed in an application to strike out when the plaintiff ultimately does regain momentum. That is what happened in the present case. The defendants' application was made after the plaintiff's awakening. These principles have frequently been applied in applications to strike out for want of prosecution; there is no reason (in the absence of demonstrated prejudice) why they should not also apply in the determination of the period over which interest will be awarded. 23 Although I was initially of the view that the delay in the present case is of such a dimension that the plaintiff should not be awarded interest on his damages for the whole period, I have been persuaded (particularly by the reasoning in Gogic) that conclusion was erroneous. I therefore propose to award interest at the applicable rate for the whole of the period.

The rate of interest 24 In Gogic the High Court held that a rate of 4 percent was an appropriate rate of interest to award on damages for non economic loss. A distinction has to be drawn between an award of damages intended to compensate a plaintiff for harm already suffered, between the date of judgment, and an award of damages delivered to compensate a plaintiff for hurt or loss or suffering that is expected to continue after judgment It seems to me that a rate of 4 percent awarded on the whole of the sum including the sum awarded for future suffering would be in effect to award the plaintiff interest on damages to which his entitlement had not yet accrued. The award of damages in defamation is designed to vindicate the damage to the plaintiff's reputation occasioned by the publication of the defamatory imputations; and to compensate the plaintiff for the injury to feelings. Both damage to reputation and injury to feelings can be taken to occur as at the date of publication; and to continue up to the date of the award of damages. The damage to the plaintiff's reputation has no doubt continued from the date of publication until the date of the judgment vindicating his reputation. The hurt to his feelings may also be taken to have continued from date of publication to the date of judgment. I see no reason to distinguish between the two. In this respect I am conscious that a passage in the judgment of Hope JA in Driscoll may suggest otherwise (p 67,648). I do not understand his Honour to have pronounced, in any binding fashion, that damage to reputation does not accrue over the period. This, it seems to me, is consistent with what McHugh JA said in Kelly as follows: "In a practical as well as a theoretical sense, the plaintiff in a defamation action is entitled on publication to damages. In particular, he is entitled to damages to vindicate him. A plaintiff in such an action sustains loss for each day that the defendant fails to pay the appropriate damages to him. However, it does not follow that the plaintiff is entitled to interest on the whole award. In many cases the award will reflect an amount for continuing injury to feelings and reputation to the date of verdict . Hence the amount awarded may, and usually will, be higher than the amount which would have been awarded as at the date of publication or even as at the date of the writ." (p 143, (emphasis added)) 25 In this case, as in others, I think it should be taken that the damage to the plaintiff's reputation, and the injury he suffered, was spread (perhaps not evenly) over the period of seventeen years. But it must be taken to cease on the award of damages. Although it may be reasonable to conclude that the greater damage was occasioned in the earlier part of the period, thus tilting the balance slightly in favour of the plaintiff for a larger interest rate, I think to do justice to both parties it is more appropriate to treat the injury as spread evenly over the period. This would justify a halving of the interest rate declared by the High Court. I propose to award interest on the whole of the damages, over the whole of the period, at a rate of 2 percent.

Costs of two counsel 26 The plaintiff sought an order that costs be awarded on the basis that it was reasonable for two counsel to be retained, notwithstanding that both counsel involved were junior counsel. It was pointed out that it is not unusual for a judge awarding costs of defamation trials to certify that costs should encompass the costs of two counsel: John Fairfax & Sons Ltd v Palmer (1987) 8 NSWLR 297; Toomey v John Fairfax & Sons Ltd, Ritchie, Supreme Court Procedure NSW, para 13,035; Goldsworthy v Radio 2UE Sydney Pty Ltd [1999] NSWSC 772, per Dunford J, unreported, 30 July 1999. 27 This was a case in which it would not have been unreasonable to have briefed two counsel. The issues, both factual and legal, were complex. The trial was lengthy. However, counsel for the plaintiff cannot escape a remark he made at an early stage of the proceedings. As a courtesy to the court, counsel foreshadowed that he may need to withdraw from the proceedings because of a prior commitment. He said that that was "one of the reasons" that his junior counsel had been briefed, to enable him to take over the proceedings in the event that other commitments of the more senior counsel required his withdrawal. 28 It is true that the potential absence of counsel who had the running of the trial was put as only one reason for the retention of junior counsel, but no other reason was advanced. There was no evidence that the plaintiff's solicitors had considered that the case was one which, other than the need for an emergency substitute, called for the attention of two counsel. The case was conducted by one junior (though senior junior) counsel on behalf of the defendants. In the circumstances I do not think it appropriate to make any ruling as to the need for two counsel to be briefed. This is not intended to tie the hands of a costs assessor: it is, in my view, a matter that lies within the discretion of a costs assessor. 29 I propose, therefore, to order that the defendants pay interest at 2 percent on the whole of the verdict amounts, from 14 August 1983. The parties should prepare short minutes of order reflecting this and all previous determinations so as to finalise the proceedings in this Division. **********

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